Should You Buy These High-Yield Dividend Stocks Now?
May 26, 2025
Key Points
Dividend stocks can be a great way to protect and build wealth over the long term. There's nothing like investing in strong businesses that distribute some of their profits back to shareholders in cool cash.
The following stocks are offering their highest yields in a long time.
Nike
(NYSE: NKE)
and
Starbucks
(NASDAQ: SBUX)
are globally dominant brands in their respective markets, but they are both experiencing weak sales that have sent their stocks down. These companies are showing progress in turning the corner, but how safe are their dividend payments?
1. Nike
Nike is the leading athletic apparel brand in the world, with $47 billion in trailing-12-month revenue. The company is going through a rough time as sales have fallen, which has sent the stock down to multiyear lows.
Nike has paid a dividend since 2004, and despite the recent dip in revenue, it is producing plenty of
earnings
to sustain its dividend payment. It paid out half of its trailing earnings in dividends. Even with Nike's earnings expected to fall to $2.14 for fiscal 2025 ending in May, its quarterly payment of $0.40 represents 75% of expected earnings.
The recent dip in sales is uncharacteristic of Nike. The athletic apparel industry has been growing for years, and Nike has been a resilient brand. Nike can return to growth, but it's going to take time to turn a company of this size around. Revenue fell again in the fiscal third quarter, down 9% year over year, and the company's guidance calls for revenue to be down again in fiscal Q4 in the mid-teens range. This guidance also reflects management's best assessment of the impact from tariff-related factors and other economic challenges.
The problem areas have been classic footwear franchises like Air Force 1, the Jordan brand, and sportswear. Demand has fallen off for these lifestyle products, which has left Nike with too much inventory. This can hurt earnings as the company is forced to discount merchandise to sell it. The good news is that inventory of the Air Force 1 is coming in line with retail demand, which could lead to more stable earnings in the near term.
Meanwhile, Nike is seeing growing demand for performance products. Management is aiming to bring down sales of classic franchises to a lower percentage of its footwear business in fiscal 2026, which should lay the foundation for a return to growth.
The stock offers an attractive
forward dividend yield
of 2.62% at the current $61 share price. But keep in mind, it could be a few years before Nike returns to revenue growth. Analysts currently expect Nike's revenue to be down 1.5% in fiscal 2026, according to data from Yahoo! Finance. Nike should deliver enough earnings to maintain its current payout, but investors should be prepared for the stock to flounder until the business is growing again.
2. Starbucks
Starbucks is another ubiquitous consumer brand that has a great record of delivering solid returns to investors, but it's having a rough time. The stock has been flat for five years, but this has brought the forward dividend yield up to a tempting 2.9%.
Despite weak sales trends, the dividend appears solid. At the current quarterly payment of $0.61, Starbucks is distributing 85% of its trailing earnings in dividends. Even with earnings expected to fall in 2025, it is still paying out less than its full-year earnings, which indicates a sustainable payout.
If the payout as a percentage of earnings moves too high, it raises the risk of a dividend cut. Starbucks will need to improve earnings in 2026 to give income investors more comfort in the dividend's sustainability. On that note, the company's CEO had some encouraging updates for investors in the most recent earnings report.
New CEO Brian Niccol came over from
Chipotle Mexican Grill
last year to lead the next chapter at Starbucks. Niccol's strategy is centered around improving the customer experience, marketing, coffee houses (stores), and menu. Management says it is seeing progress that isn't reflected in the financial results, such as stabilizing customer transactions and lower employee turnover. While global comparable store sales were down 1% year over year in the most recent quarter, this is a slowing rate of decline compared to previous quarters.
Investors should expect this top coffee brand to deliver profitable growth over the long term. Obviously, there is uncertainty over the tariff impact on consumer spending in the near term, but management believes it is making the right investments that are laying the foundation for long-term growth. Niccol even expects the business to emerge from this slump more profitable than ever, which can support further dividend increases.
"We're also focused on managing costs and improving our financial fundamentals so that as growth returns, we capture more of every dollar spent in our coffee houses," Niccol said during the fiscal Q2 earnings call. "We're already starting to see early indicators of recovery in our North America business."
Niccol is positioning Starbucks for improving margins similar to what he accomplished at Chipotle. This could drive double-digit earnings growth in the coming years. Investors should expect Starbucks to maintain and continue to increase its dividend over the long term. This prospect makes the stock a compelling income investment.
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John Ballard
has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Chipotle Mexican Grill, Nike, and Starbucks. The Motley Fool recommends the following options: short June 2025 $55 calls on Chipotle Mexican Grill. The Motley Fool has a
disclosure policy
.
